CDA asks CUC to settle $100M debt

Commonwealth Development Authority Board Chair John S. Tenorio yesterday said he will ask the Commonwealth Utilities Corp. to begin paying its $100 million debt since the planned debt-to-equity conversion scheme has been temporarily shelved.

Amid efforts to carry out a $60 million bond float, Mr. Tenorio expressed concern that failure of CUC to start settling its loan may have an effect in securing a bond rating.

“It might send wrong signals to international lending institution and harm the credibility of CDA,” he said. Mr. Tenorio said he will send a letter to the utilities corporation reminding them of their obligation to pay the huge debt.

CDA has already chosen the team of Paine Webber, California Financial Services and American Capital Access to underwrite the tax-exempt $60 million municipal bond float scheduled to be held next year. Proceeds will be used to fast-track the implementation of Capital Improvement Projects, which have been delayed due to lack of matching funds.

With the failure of CUC to resolve the controversial 80-megawatt power plant project, CDA has temporarily shelved the debt-to-equity conversion plan. The utilities firm’s debt to CDA has almost doubled to $105 million since June 1997.

Some $10 million of CUC’s loan to CDA was used to pay Japanese conglomerate Mitsubishi for the purchase of generators.

The CUC board has withheld the selection of a firm that will build the 80-megawatt power plant pending assessment of the need for the project with such magnitude.

At the same time, the utilities board will have to review further the report made by Burns & McDonnell, an independent firm that evaluated results of the various bids on the controversial Saipan power plant project, since it generally countered the decision to award the $120 million contract to Marubeni-Sithe.

While CDA has not reneged on its promise to help the utilities corporation become financially independent, Mr. Tenorio said, he believes that there are still some issues which must be resolved first before the debt-to-equity conversion can push through.

“We do not want to intervene with the operation that’s why we do not want to push through with foreclosure of CUC. To make sure that the bondholders would have confidence in the CNMI, CUC must pay,” he said.

Before any debt-to-equity conversion can be made, an amendment to the CUC statute must still be made by the Legislature to clarify some issues such as the number of board seats CDA must hold in the CUC board. CDA said it is not really interested in running CUC because it has full confidence on the management of the utilities firm.